Interim results were released on Nov 20 and it was a solid half-year performance, leading the board to declare an interim dividend of 2.8 HK centsper share (2017: 2 HK cents) and a special dividend of 8.7 HK cents (2017: Nil).

The share price closed at HK$2.08 yesterday, up from HK$1.74 at the start of this month (Nov).

The drive to focus on margins expansion is working admirably – note the divergence of sales (down) and gross profit margin (up).

Oriental Watch is a distributor of Rolex watches, amongst others. Photo: Company

"Oriental Watch is obviously selling time-pieces with higher gross profit margins and the sharp growth in group gross profit margin is telling. The 39% growth in EPS exceeded my expectation of a rise of 25%."- Lotustpsll (photo)

Rental expenses have reduced further (7% drop as compared to last 1H). Operating expenses are being managed effectively.

The further decline in inventory level is a good indicator that management is working hard to further optimise its inventory management.

This will impact positively on its free cash flow (FCF). (Note – Cashflow Statement will be available only later when the Interim Report is released)

Stock price

HK$2.08

52-weekrange

HK$1.57 – HK$2.72

PE (ttm)

7.6

Market cap

HK$1.2 b

Shares outstanding

570 m

Dividend yield (ttm)

5.2%

1-year return

32%

Source: Bloomberg

The larger dividend pay-outs may have taken the market by surprise. As for me, I was expecting it as the Group had paid out dividends that were close to its EPS in the last FY.

This is interesting as I expect Oriental Watch to keep on paying high pay-outs to shareholders.

Barring any unforeseen circumstance, can Oriental Watch sustain its EPS growth and to maintain high dividend pay-outs? IMO, I believe Oriental Watch can deliver :-

♦ Group’s business strategies are delivering well (contain costs and improve margins)